Common Agricultural Policy

HC Deb 06 December 1995 vol 268 cc283-305

Motion made, and Question proposed, That this House do now adjourn.—[Dr. Liam Fox.]

9.34 am

Mr. Tony Marlow (Northampton, North)

I regret to say that I have an interest to declare. I am a shareholder in a company which, among other things, owns what I think in Europe would be called a large farm but in Britain is a small farm. I receive subsidies through the common agricultural policy.

I understand that a resolution was passed in the House recently—I voted against it—whereby, if one has such an interest, one is not allowed act as an advocate for that interest. I will do my best and be very careful, but I am in fear and trepidation of the parliamentary beak, he who has been appointed to supervise those of us who have been elected.

Northampton, North is an urban constituency, and my constituents might well wonder why I am on my feet talking about the CAP. Some hon. Members may remember that I and some of my hon. Friends were rusticated from the Conservative party for a period earlier this year. That was a desperate and deeply worrying situation, if for only one reason: we were deprived of the tender loving care and advice of my right hon. Friend the Patronage Secretary.

We therefore had to think for ourselves, which was a very dangerous thing. We looked at the various areas of policy, and we tended, one by one, to look at particular areas of policy. My hon. Friend the Member for Ludlow (Mr. Gill) concentrated on fisheries, and I looked at agriculture, which is one of the reasons why I have some limited knowledge of the subject.

I would submit to my constituents and to the House that the CAP is very important to them, as I will go on to prove, as it is to the rest of the country. Why is that? First, there is the cost. This country spends each year on European policies some £10 billion. Over half the money that is spent on programmes—up to 80 per cent.—is spent on the CAP. We will spend this year and next year a likely net £3.5 billion—that is money into thin air, money for nothing. One of the main reasons for this expenditure is the CAP. The CAP is the wrong policy, and it affects everybody in the country through their pockets.

The CAP also affects people through their pockets because of the very high level of consumer prices. There is an artificial price level in Europe, above the world market price, which means that everybody has to pay more for their food than they would otherwise have to. Since the MacSharry reforms, and since world market prices have gone up, that is not as marked as it has been, but it could become marked again in the future.

Thirdly, we lost our Icelandic waters, and were not allowed to regain fish in our own waters because of the common fisheries policy. We had a bad deal on fish. We had a bad deal on the budget, the net payment that we have to make. As with fisheries, we have also, with regard to rest of Europe and despite some brilliant work by Ministers of Agriculture, Fisheries and Food—not least by my right hon. Friend who is now Secretary of State for the Environment—a bad deal for agriculture, even within the bad CAP in Europe.

The CAP also, as everybody in Europe is increasingly coming to recognise, gets in the way of the sort of Europe that we in Britain want. We want an enlarged Europe—enlarged to the east for its own sake, for security, for the well-being and decency of the people of eastern Europe, and for the security of Europe. Also, an enlarged Europe will have to have a variable geometry, which is very much in the UK's interest—otherwise, we would have a federal European state, which we do not want. We want an enlarged Europe, but that is impossible with the existing common agricultural policy.

The consumer pays higher than necessary prices; the cost to the taxpayer is higher than necessary; and we are paying for an agricultural support system that discriminates against efficient UK agriculture and in favour of less efficient continental farmers. The CAP is a system of agricultural support that is wrong for the United Kingdom, was wrong in the past for Europe, and is certainly wrong for the future Europe for which we should be aiming.

Why do we need a system of agricultural support? My hon. Friend the Member for Southend, East (Sir T. Taylor) has often said that, given the right subsidies, he could grow tomatoes profitably at the north pole. There is a certain Powellite logic to that argument, but it is not right to apply it to agricultural support.

We need a system of agricultural support for various reasons. First, the risks in agriculture are much greater than in any other business. There are not only risks involved over what might happen to the market and prices, but climatic risks. Without the limited level of certainty that is provided by a system of agricultural support, no farming community would have sufficient confidence to invest in and maintain—as British farmers do—one of the world's most efficient and cost-effective agricultural industries.

What should a good system seek to achieve? First, there has to be an element of self-sufficiency for strategic reasons—one never knows what will happen in the wide world, so we need the ability to feed ourselves. Secondly, we want an attractive countryside—we have not achieved one by developing a rural theme park throughout the UK. An attractive countryside has been developed through the activities of our farmers over hundreds of years. We shall continue to have an attractive countryside if it is farmed well and properly.

Thirdly, we need a system of agricultural support that optimises the balance of output, profitability, sustainability and value to the taxpayer. The system must also supply the cheapest basic food commodities, which has the added benefit of reducing the cost to the taxpayer of many of the programmes that he and she has to provide. Those who are less well off typically spend 25 per cent. of their budget on food; those who are better off spend perhaps 10 per cent. of their budget on food. The social security budget is massive, but in real terms it would become less of a "burden" on the taxpayer if we had a policy of cheap rather than expensive food. As we consider the various systems of agricultural support, any calculation of the cost to the Exchequer has to take account of the fact that cheap food would reduce that cost.

What is wrong with the existing system of support, the CAP, for the United Kingdom? The first problem involves the overall cost: a £10 billion gross contribution, which is a lot of money, and a £3.4 billion per year net contribution. The second problem relates to the specific cost of some of the programmes, such as the tobacco—the poison weed—regime. That regime costs Europe—and we contribute—£1 billion a year; half the tobacco is virtually unusable, cannot be smoked in Europe and has to be dumped on the world market. Why should we subscribe to that regime?

The olive oil regime costs, on average, over five years, £1.5 billion a year. In addition, the regime means that the price that housewives and shoppers in this country have to pay for olive oil is more than they would otherwise have to pay in the world market. There is a wine regime—is there a hops regime? Why should Britain contribute to the annual £1 billion cost of shoring up the vineyards of Europe?

The third problem involves bureaucracy. I do not know if hon. Members follow "The Archers", but poor old Brian Aldridge seems to be in a bit of a hole at the moment because he filled in his forms incorrectly and is losing tens of thousands of pounds—

Mr. Elliot Morley (Glanford and Scunthorpe)

Nine thousand five hundred pounds.

Mr. Marlow

I am sorry—£9,500. I said "tens of thousands of pounds", when I should perhaps have said "nearly" tens of thousands or "fractions of tens of thousands of pounds. Someone follows these matters more closely than I do.

I am not particularly sorry for Brian Aldridge and people like him, but farmers have to become more skilled in filling in forms than in agriculture—looking after their crops and animals—which is bizarre. Many farmers who are not trained in such skills find it difficult to cope. They are concerned that they put the wretched forms in the post in April or May, no one tells them whether they have completed them properly and will receive their money until December, when they receive no cheques either because they have been lost in the post or because the forms were not completed correctly. That system causes many people grave anxiety, and they find it difficult to cope; it is also bureaucratic nonsense.

Bureaucracy does not only produce costs for the farmer, who might have to pay for expensive advice: we have to pay for bureaucrats to look at the forms and try to make sense of them. Bureaucracy costs money and wastes time and space, and the system should be abolished.

Bureaucracy also encourages fraud. In Greece and Italy, the CAP has been ripped off by the Mafia and various other unscrupulous groups. It is estimated that there is currently £4 billion a year of fraud in Europe, and I am sure that much of the fraud occurs in the CAP. Greeks and Italians will not prevent fraud occurring in relation to a European policy in which they spend European money in their own countries—and neither will anyone from Brussels. The only way to prevent that fraud is to change the CAP.

The fraud partly explains why this country—and Europe as a whole—is becoming increasingly Euro-sceptic. We believe—I think with justification—that terrible things happen in other countries because their officials allow it, but our officials do not let us get away with anything. That is a deeply unhealthy by-product of the CAP and builds up a culture of cheating, which, mercifully, has not been part of our country's culture until now.

The United Kingdom also faces problems relating to the specific crop areas. We probably have—to borrow from the Carlsberg advertisement—the most efficient arable farmers in the world, yet we in Britain have to take more of our arable land out of production than any other country in Europe. We probably have the most efficient dairy producers in the world hut, owing to the quota system, we are not allowed to produce enough milk products even to satisfy our own market.

The quota system is nonsense—it is a restrictive structure that is doubtless necessary under the existing regime, but if we changed that policy, perhaps we could abolish the quota system. The quota system is politically embarrassing, because people are paid to set aside land and grow weeds on it. Could we not devise a better system? Most people are irritated by the present system, and any wise Minister should take account of that.

What should we do? I shall grossly over-simplify what I know to be a complicated subject, and set out a few principles. I believe in free trade, and I should like to see free trade among agricultural products in Europe and between Europe and the rest of the world. There should be a common price level throughout Europe, as at present, but at world market prices. That would not only be suitable for the old and developing Europe, but, owing to the cheap cost of agricultural commodities in the east, it is essential if we are to expand Europe.

We must repatriate our system of agricultural support, so that each country has its own support regime and each country pays for its agricultural support. Agricultural commodities in Europe should trade at world market prices, without levies, without duties and without restitution. I shall discuss that in more detail, commodity by commodity.

Let us start with pigmeat and poultry. I do not want to upset the animal welfare lobby, but, these days, pigmeat and poultry have become effectively a manufactured commodity. It is possible to produce plastic from oil—one feeds in oil at one end and produces plastic at the other end. To a certain extent, one feeds in grain and proteins at one end and produces a poultry product; further down stream, one may produce a detailed product. One may produce a poultry commodity or a pig commodity at the other end. There is no system of agricultural support for pigs and poultry, and there needs to be no succinct system for support in the future.

Arable is a very important sector. We should go back—or go forward—to a new system of deficiency payments. I shall take wheat as an example, although, obviously, other cereals would tie in. One would have a reference price, and if the price in the market fell beneath the reference price, there would be a make-up between the market price and the reference price. The reference price would be calculated to be what arable farmers would need to receive, year on year, to have sufficient confidence to become effective and efficient, and to carry out their business.

There would have to be a cap on the tonnage for which that support could be paid, so the total support would be the cap tonnage multiplied by the difference between the reference price and the market price, and the deficiency payment, in the event, per tonne would be the total support paid divided by the actual tonnage.

Capping would have three effects. First, it would limit Treasury expenditure. Treasury expenditure would be determined solely by the difference between the reference price and the world market price, and the cap would prevent the Treasury from having to spend any more money if there were a bonanza harvest.

Secondly, capping would enable such a system to comply with the GATT regime. As the House knows well, the GATT regime allows a system of acreage payments, and such a system of deficiency payments would accord with GATT, because it would not encourage increased production against GATT, or provide subsidies for exports, which would be contrary to GATT.

Thirdly, if there is a bumper harvest and superabundance, why should the Treasury pay? The farmers are doing quite nicely anyhow.

There should be a new system of deficiency payments for milk and dairy products. Before the farming year, a reference price would be agreed. Deficiency payments would be payable between the average achieved price and the reference price. There would be capping, such that, if production increased, payment per litre would reduce commensurately.

In the dairy sector—I know that this goes against all the market tenets—I believe that it is essential to safeguard the position of the small farmer. Socially and environmentally, it is essential that we maintain those prospects, to ensure that our rural areas remain vital and vibrant communities.

To achieve that, it may be necessary to give every dairy farmer a minimum gallonage, on which a full make-up could be paid. As marginal overall production increased and the marginal payment decreased, the lower price would increasingly fall on the larger farmer. If we get our figures right, I am sure that it would be right for the small farmer and for the large farmer.

For wonderful, tasty, lovely beef and lamb, we might also have a new system of deficiency payments. They may not be necessarily especially high, and they may potentially be at a reducing level, because there is a massive potential world market out there. At the moment, with quotas sitting on our sheep industry, we are discouraged from taking advantage of it.

That would be the system. As circumstances, needs, the world markets and fashions change, my hon. Friend the Minister would be able to play whatever tunes he felt were right for the country, for British agriculture and for the interests of GB Ltd. on the world market. He would be able to do it, and we would not have to go to Brussels to have it done; we would be able to do it here.

Can we do it? Can we get away with it? Is it possible? Who opposes it? I wonder what the position of the National Farmers Union and the Country Landowners Association would be. The National Farmers Union is a good union, but it is a union, and unions—if Labour Members will forgive me—tend to be conservative. Unions like to bind in their members, and they like what they have at the moment. Everyone is okay at the moment.

I know that the NFU is saying that things might not be quite the same in future, and that we must think awkward thoughts about the future, but it likes to think of its members and tell them:

always keep a hold of Nurse For fear of finding something worse. If the union frightens its members about such changes, and if its members are frightened anyhow, I am afraid that they will continue to be conservative. They like what they have, and they are frightened of change. They should not be frightened of change.

Farmers love quotas. Quotas now have capital value and are traded. One litre of milk quota sells for 60p or 70p. It costs 10p to trade or lease 1 litre of milk quota for a year. It is big money. A while ago, some farmers' milk quota was worth as much as the land and the cattle put together. It is nonsense, but people like it, and they are frightened of losing it.

Mr. Morley

Those who have it.

Mr. Marlow

As the hon. Gentleman says, those who have it. For those who do not have it, it is a great block, preventing them from entering the market. I am glad that the hon. Gentleman agrees with the philosophy of Conservative Members that we should have flexible markets and allow people to enter them, and that we should not structure things in the way that they are at the moment.

There is fear of the Treasury. There is a feeling that, if we repatriated our agricultural policy and the Treasury were responsible for it, the Treasury would be mean and would bear down, and there would be no proper system of agricultural support, so all the other farmers in Europe would do better than farmers in the United Kingdom.

No British Government would turn their back on their own farmers. They have not done so in the past—we had an effective system of agricultural support before we joined the Community. I do not believe that any British Government would allow a system of agricultural support to devastate our countryside, which is one of the jewels of the United Kingdom.

Besides, given the potential savings if we were not making the massive contribution to Europe that we make at the moment, given the fact that we would have cheap food, and therefore the bills to the Treasury for social security would be less than they would otherwise be, there would be money for the Treasury to be more generous with agriculture than it is at the moment—not that that would be necessary—and at the same time to make savings on its existing expenditure.

It is a great world out there. There is a growing population. Some parts of the world have rapidly increasing living standards, but a decreasing ability to grow their own food. We have a powerful agriculture here, which is encouraging. Would our partners accept those changes? Some would not like it at all. Each Greek at the moment gets £285 a year from Europe. Each Portugese gets £391 a year from Europe. So be it; too bad. I do not see why they should. That must be stopped. The Irish are getting £447 a year. A new system of agricultural support might benefit Ireland, as it would us. Ireland has potentially a very prosperous agriculture. It could benefit from those changes.

France is a net contributor. Why should not France, in the long term—looking at the world market out there, France being an agricultural exporting country—go along with those changes? If Europe expands, there will be social payments to eastern Europe. Can we afford it? There will be agricultural payments to eastern Europe. Can we afford it? No; we cannot. So there have to be changes, and those changes will be of benefit to France.

Germany likes the common agricultural policy for one reason—that it must support its farmers, it feels. It has many small farmers. If those farmers were supported through German taxation, it would be politically unacceptable in Germany. As the support is routed through Brussels and comes out again, apparently the German public do not know what is being done in their name, so they are satisfied with it.

However, Germany now has the overriding priority to join up with eastern Europe, and the Germans cannot have both the CAP as it is now and a greater Europe, moving to the east. Something has to give. I suggest that the change in the common agricultural policy would do it. Germany makes a massive net contribution to Europe. Germany is getting increasingly restive about that net contribution to Europe. This is the way that German demands and desires can be satisfied.

I summarise the advantages of the changes that I suggest. First, we could do away with the iniquitous dock labour scheme type system of quotas, which would allow—with difficulty, but it is very difficult anyway—more newcomers to come into agriculture. That would allow much more efficient use of the land, because it would not be artificially structured as it is now. It would allow increasing opportunities for agricultural entrepreneurs, so that we could optimise agricultural output and production.

The changes I suggest would allow the Italians and the Greeks to pay for their fraud. That would be fair, and the British public would enjoy that. The British public resents keeping those states in the manner to which they feel they should be accustomed.

My changes would lower food prices. If, at any stage, there were low world food prices, the British consumer would be able to take advantage of them. The changes would be of great benefit to the Treasury, because lower food prices would lower the transfer payments that the Treasury has to make annually. My suggestions would lead to an opportunity for Britain to increase sales of agricultural products in a growing, wealthier world, and, as I have said before, they would increase the sovereignty of the House and the Government. We would once again have control over affairs that should not be controlled from across the channel.

Yesterday's events in Paris, with the declining probability of monetary union and a single currency, the political reaction to those events that is likely to follow, and the realisation that the Maastricht treaty has been imposed by an elite against the wishes and interests of the people, mean that there is potentially a new destiny for Europe that is yet to be moulded. Let us try this time to mould it in the interests of the people of Britain and Europe, not in the interests of the institutions. I have one piece of advice for my hon. Friend the Minister of State—courage, mon enfant.

10.1 am

Mr. Paul Tyler (North Cornwall)

My middle name is Archer, but I predate the programme. When my ancestors arrived in Cornwall in 1066, presumably with an unpronounceable Norman name, they were simply known by their occupation.

I have news for the hon. Member for Northampton, North (Mr. Marlow)—"The Archers" is make-believe. Incidentally, he seems to have seriously misread the plot by referring to "poor" Brian Aldridge. He has misunderstood what is happening in the British countryside. There is nothing poor about Brian Aldridge, because he is a cereal farmer on a big scale. However, the livestock farmers, good and bad, in Ambridge may share the concerns of the hon. Member.

Throughout the British countryside, there is a recognition that the status quo is not a long-term option. Back in 1992, when the Secretary of State for the Environment, the right hon. Member for Suffolk, Coastal (Mr. Gummer) was the Minister and he came to this House with his bit of paper—the "peace in our time" of the countryside—some of us expressed real concerns about the extent to which that reworking of the CAP could possibly be sustainable. I have some sympathy with the hon. Member for Northampton, North, because he too was worried at that time, although his was a lone voice in the wilderness on the Government Benches.

Liberal Democrats represent many rural areas, and we were worried that the over-concentration on area payments and on set-aside revealed a degree of mismatch and mis-targeting that was agriculturally, economically, environmentally and politically unsustainable. We have been proved right.

We also felt that there were insufficient mechanisms for adjustment if world prices changed at a different speed or in a different direction to the forecasts. We have recently heard the frank confessions of large farmers, such as Oliver Walston, about the extent to which they are reliant on huge cheques from the public purse. Those confessions show that the lack of any efficient mechanism was a serious deficiency.

Most seriously, Members of all parties, and Commissioner MacSharry, were worried that those reforms were represented by the then Minister as the last word for the foreseeable future on reform of the CAP. Clearly that is not true, and today we know it not to be true. Those reforms were the first step, and the momentum had to be maintained.

The Government frequently tell us that they are in favour of reform, but that everyone else still wants to sin. Apparently we are the only country in Europe recanting our sins. I do not believe that to be so, and the discussions that I have had recently in other member states, new and old, suggest that that is not the common view of those who have a real appreciation of what is happening to the CAP. That is particularly true of the new members. In the rural policy White Paper, there is an admirably succinct summary of what is wrong with the CAP. I draw attention to the fact, which the Minister recently repeated to me in the House, that

total transfer payments from EC consumers and taxpayers (including national budgetary expenditures) are estimated by OECD to have exceeded total EC farm income in 1993 by 50%". In other words, half the total investment never reaches farm incomes, and farmers do not benefit. The leakage down the chain is comparable to, and exceeds, that of the water companies, about which hon. Members have been so critical. The investment that we hope will reach the countryside and the primary producers does so to the extent of only one half.

The other criticisms in the rural White Paper are valid and right. We now need to know how they will be communicated to our partners and be turned into real reform. On that issue, the Government's White Paper is sadly silent.

One would hope that the Ministry of Agriculture, Fisheries and Food and the Department of the Environment would have some influence on the Foreign Office. The Minister of State has experience in the Foreign Office, so it will be interesting to hear his comments on the extent to which we can rely on allies and friends in Europe. I suspect that many in Europe wish to take the same route as ourselves, with adaptations to suit their circumstances. However, our record of making friends and allies is not good; nor is our diplomatic success in trying to ensure that specific British interests are well represented.

The hon. Member for Northampton, North referred to the milk quotas debacle, which stems from the negotiations by British Ministers in Brussels in 1986. They negotiated away 15 per cent. of our total national milk need, and we are now allowed to produce only 85 per cent. of our total needs. That is not a failure of the European Union, because one could say that it is a success for all the other member states in obtaining a quota higher than their national needs. Those negotiations were a direct failure of our Ministers to represent the industry effectively.

The hon. Member for Northampton, North would like to renationalise agricultural policy. He should know by now that our agricultural interest is comparatively small, and the influence it exerts over Whitehall is limited. We have huge problems in trying to ensure that the ministerial interpretation of European Union policies is to the advantage of British farmers.

Is opting out of the European Union realistic? We could not be a member of the European Union and be a semi-detached member of the CAP. There are two possible scenarios. The first, and I suspect the real motive behind the hon. Member's suggestions, is to cut our links with the European Union and float out into the Atlantic. Not only farmers but those who are concerned about the future of countryside would regard that with grave suspicion.

The second scenario would be for every other member state to repatriate its own agricultural policy. We know what would happen then.

Mr. Marlow

It is a little tiresome that, whenever anyone suggests any change, reform or differences within Europe—I am not just suggesting that Britain should repatriate its agricultural policy but that every country in Europe should—the Liberal Democrats' unique response is to say that one wants to leave Europe and drag Britain off into the Atlantic. I have never suggested that, nor am I ever likely to do so.

Mr. Tyler

I am grateful. That view is not shared by all the hon. Gentleman's honourable colleagues, as I have heard in recent weeks. However, I take him at his word.

If his purpose is to encourage other member states to repatriate their agricultural policies, the immediate effect would be that those member states which count their agriculture industry and vote rather more highly in their lists of national priorities than do the British Government, will inevitably seek every way possible to make the present uneven playing field even less even.

For example, there will be no motive power, no momentum, to level up standards of animal welfare, either in terms of rearing methods or animal transport. That will go by the board. The already high burden that is carried by British producers would be made that much more difficult in competitive terms, because every other member state with a large agricultural community would do everything it could to ensure that we were at a competitive disadvantage. Repatriation of British agricultural policy means repatriation of French, German and Italian agriculture support. The effect on our position in the wider market would be disastrous.

The hon. Gentleman has rightly referred to Ministry of Agriculture red tape. At present, it is our most successful home-grown crop. The Minister himself has noticed that, over the past 16 years, it has grown apace—far more quickly, far more effectively than anything that is achieved in any other member state. Would that all be swept away by repatriation? I do not believe it for one minute. Consider the new consultation paper on the transport of livestock. It seems that nothing comparable is being produced in any other member state. We are binding our industry hand and foot in a way that is simply not experienced in other parts of the Union.

The hon. Gentleman seemed to say that his remedy was based on the old traditional slogan of the Conservative party, "Trust the Treasury". Anybody in agriculture, having seen last week's Budget, knows that to be moonshine. The Treasury cannot be trusted for one minute to look after British agriculture. If the Minister was in a quiet corner and was not on the record, I think that he would agree. Many former Ministers would also agree.

Consider last week's Budget. Incidentally, the Budget is now the only opportunity that the House has to consider in full the way in which agriculture and the rural community are being supported. All the schemes in the rural White Paper that are said to be beneficial or helpful to the rural policy of our country, to its development, to the enhancement of the environment and to employment prospects, are cut.

The hill livestock compensatory allowance will not be restored, against all the logic of previous Governments' positions. Dirty water schemes, essential for the pollution prevention schemes of the past, have all gone and will not come back. Farm and conservation grants have gone. Extensification and organic food supplies, which are being extensively supported by other national Governments in the union, for which purpose they can draw down European funds, have all gone. All the highly targeted and well thought-through schemes for British agriculture, supported by those who believe in its future, have gone. They are at the mercy of the Chancellor. He can wield his axe over them. If it were not for the representations that we all make to the European Union, I suspect that the situation would be even worse.

As the hon. Gentleman rightly said, the Government are now faced with a choice. In the past, their strategy for the union has been enlargement rather than deepening, widening rather than intensification. In those circumstances, I hope that they will today be able to give us a considered response to the extremely important new paper that has been delivered in the past few days by the Commissioner, Mr. Franz Fischler, in which he says, quite uncompromisingly, that there is no way in which the Union can enlarge to the east, to the former Communist countries—Poland, Hungary, the Czech and Slovak Republics, Slovenia, Romania, Bulgaria, Lithuania, Latvia and Estonia—until major structural reforms are made to the CAP's format. I understand that the Commissioner and other members of the Commission go further, saying that other structural changes of considerable importance will be necessary to the very institutions of the union itself.

Hitherto, Ministers have said that they can have their cake and eat it. They can delay reform of the CAP until a more propitious time, but they want to proceed with enlargement to the east as fast as possible. In an extremely important article in the Financial Times last week, headed, "No farm reform, no EU enlargement", it was made clear that that it is not just the view of the Commission, but widely shared among other member states, that radical reform is essential.

Let us not forget that that reform can be achieved by consensus as long as the structural problems are addressed at the same time, particularly the democratic deficit. The hon. Gentleman, and some of his hon. Friends—by whom I mean those who were rusticated in the recent departure into the countryside to which he referred—are fond of saying how important it is to retain the British veto. Retaining the British veto over social, economic, employment policy is all very well, but retaining the British veto over that means that the Greeks will seek to retain their veto over any real, deep-seated, far-reaching reforms of the CAP. The same will be true of the Italians and others.

I hope that we shall have an explicit commitment from the Minister today that, at the ministerial meetings that will be taking place in the next few weeks in preparation for the intergovernmental conference, the Government will make it a specific objective to put the reform of the CAP on the agenda for the IGC next year. That is of critical importance, not just for the reasons that the hon. Gentleman mentioned, but so that farmers can know that there is a long-term sustainable policy by which they can chart their course for the future.

10.16 am

Mr. Paul Marland (West Gloucestershire)

As in the case of my hon. Friend the Member for Northampton, North (Mr. Marlow), the Register of Members' Interests will show that I too am walking on eggshells during this debate, so I shall be extremely careful in what I say and not speak with too much authority on those subjects about which I know a great deal because I have studied them. I shall speak with great caution.

I have total common ground with my hon. Friend, but I must disagree with what he says about repatriating the CAP and giving each country more control over its agricultural policy. If the United Kingdom were to do that, we would marginalise ourselves in the European Community. That is something that the British farmers do not want—nor, I believe, do the British public and all those who work in industries which add value to foodstuffs. It would be a disaster. Some countries, as we have already seen, would favour their farmers at the expense of other farmers in Europe—I cannot say "within the Community", because, if we were to repatriate our own agricultural policy, we would not be in the Community.

We have seen examples of how discrimination or subsidy by other countries can disadvantage our business. At least within the CAP there is some method of enforcing a level playing field and stopping other countries blatantly subsidising their own agriculture. The French gave a 120 per cent. capital grant for the construction of a turkey processing plant in Brittany in order to swamp the British market with oven-ready turkeys. We were able to stop that. The French have also given special subsidies to their pig farmers, which has also been brought to a halt under the CAP.

The Dutch Government have subsidised heat for their glasshouses, which the European Community, under its policy to treat all countries the same, has also stopped. The Irish have in the past given special help to their mushroom growers, and the Agricultural Commissioner has taken considerable interest in sorting out that mess too.

As the hon. Member for North Cornwall (Mr. Tyler) said, animal welfare would not be standardised throughout Europe, which would go very much against the grain of those interested in animal welfare and rights.

Mr. Marlow

My hon. Friend is talking about agricultural industrial products. There are in Europe and the single market constraints against some Governments subsidising their own industries while other Governments do not. I would imagine that the same principles would apply in future to agricultural industrial products, so my hon. Friend does not have to worry about that.

Mr. Marland

With respect, my hon. Friend is assuming too much. I assume that, if we repatriate agriculture to individual countries, there will be no controls whatever, and countries will be able to do what they wish with their own agriculture and agricultural production. That is the rub.

The CAP is expensive; it needs reforming and tightening up, so we are on common ground. That is happening, but not speedily. I agree with my hon. Friend that tobacco growing in Greece is utterly ludicrous and must stop. It is, however, important to keep matters in perspective.

The single market across Europe in agricultural products provides a great opportunity for British agriculture and those who add value to agricultural products in Britain to export into a free market. There are no tariff barriers against our exports into Europe. If we repatriated our own agricultural policy, tariff barriers might be erected against our exports. For example, the export of lamb has improved enormously as a result of the efforts of British farmers exporting into France, and we now export 30 per cent. of our cereal production and a large and growing proportion of our beef production.

Turning to value added products, we all know about the British manufacturer exporting pizzas to Italy, but there is a mass of other products. It is interesting to look at one or two sectors in which value is being added to raw agricultural produce and the manufacturing industry attached to agriculture is making profits, adding value and creating wealth in Britain as a result of those activities.

We can buy prepared bags of salad containing a number of different varieties of lettuce and other salad products, all washed and ready for the table. One has only to open the bag and shake it up. Those are being exported, and rightly so. There is no reason why only British housewives should take advantage of those products. Potatoes of different varieties—large ones for putting straight in the oven and roasting, and small, new potatoes—are being washed, packaged and exported from the United Kingdom. Eggs of different varieties, sizes and colours are also packaged well and exported to Europe.

One may think that bottled water comes to Britain from Europe, especially from France, but an enormous amount of bottled water is exported from Britain into Europe, and many farmers have bottled water enterprises on their farms as alternative earners. We do not only import yoghurt from France and Europe. Value is added to raw milk in Britain to make expensive, value-added dairy products, and we export yoghurt to France, especially fibre-added yoghurt, which is being sold as a health food. Our industry has created an excellent opportunity for export into France, creating wealth and opportunity in Britain.

Branded cheeses such as double Gloucester, which is manufactured in Gloucestershire, as my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) knows well, are also being exported.

Mr. Marlow

If we did not have such a ridiculous system of quotas, would we not be able to sell rather more branded cheeses in Europe and the rest of the world? My hon. Friend will forgive me, but I was saying that we should still have a free market for agricultural products in Europe. There is no way that there would be tariffs. Was my hon. Friend suggesting that I was saying that there should be tariffs?

Mr. Marland

My hon. Friend cannot say that for certain. In my hon. Friend's dream scenario, if we repatriate agricultural policy to individual countries, how will we know whether any country may decide in future to protect its own farmers and food manufacturers and erect a barrier so as to free exports of agricultural and fresh products?

Change is necessary to the common agricultural policy, but it should be gradual and fair, and should apply equally through all European countries. The present form of the CAP is working much better than it did in the past, and has reduced stocks of surplus food substantially. In my constituency in the Forest of Dean, an industrial estate in Lydney used to rent out massive warehouses for stockpiling surplus grain that had been bought in under the common agricultural policy and could not be sold.

Mr. Morley

It also happened in Scunthorpe.

Mr. Marland

It was bought in and stored at enormous expense, and exported at a knock-down price. That was even more costly than the current set-aside scheme, which seeks to reduce the output of cereals. I am not saying that the CAP is perfect—it needs reform—but there have been strides in that direction.

A balance is emerging in stabilised farm incomes in the United Kingdom, which have generally moved up in the past few year. That is a good thing for rural communities, because farmers do not sit on the cash; they spend it in the local rural community in which they are living and operating. That is good for maintaining population in isolated areas.

The overall budget of the CAP is now under stronger control than ever before, but fraud remains a serious problem, taking some 1 per cent. of the budget. It may be more than that, but that is a ball park figure. The Commission is determined to tackle the problem more rigorously than it has in the past, and we give it every support we possibly can. Perhaps Labour Members might have a word with Commissioner Kinnock, so that he might turn his attention to it when he has sorted out the air miles.

Further reform of the CAP is under way. That is inevitable, forced on by the enlargement of the European Union and another round of GATT in 1999. Increases in agricultural efficiency also drive forward the need for reform. Although we devote a smaller area to cereal production, improving techniques and methods of production, collection and storage make a terrific difference to the output in agriculture; whether it is an acre of land, a cow, a pig, or a flock of chickens, a variety of technical advantages are being made every year to make it more efficient. That represents another way of driving forward the reform of CAP.

The change in agricultural support must be given time to take effect, because agriculture is a business with a slow turnover. A cereal farmer turns over his entire stock only once a year, so notice has to be served on the producers of the products of what future changes will be made, so that they can plan ahead.

I am pleased that farm Commissioner Franz Fischler has confirmed that reform to the CAP is necessary, and that EU agriculture must become more market-oriented and closer to the market. That will undoubtedly lead to greater stability, security and dignity for farmers, and will enable payments for specific objectives to be targeted more accurately.

We are all in favour of more assistance for environmentally friendly schemes for environmental care, and for isolated areas to get special assistance for projects that may enhance the standard of living of the people in those communities.

I spent quite a bit of my holiday in isolated parts of the United Kingdom. On the island of North Uist, at a small town called Loch Maddy, there was a slaughterhouse that killed all the animals that were produced on the island. That had great appeal, as the hon. Member for Glanford and Scunthorpe will know, because the animals were slaughtered on the island and not exported on the hoof. I understand that the slaughterhouse had to be closed because of changes in hygiene regulations.

It is a travesty that that little business should fail as a result of hygiene regulations if there is no money to seek to put it right. I very much hope that there may be some way of targeting money on such schemes, instead of building a dual carriageway round the island of North Uist, which is currently being undertaken using European funds.

Mr. Tyler

Is the hon. Gentleman aware that, in the past 10 to 15 years, the number of abattoirs in England, Wales and Scotland has halved as a result of the imposition of regulations emanating from London rather than Brussels, while in Northern Ireland, where those regulations have not been imposed, there has been nothing like the same reduction?

Mr. Marland

In some instances, that is a good thing. Some slaughterhouses were definitely not up to standard. However, the slaughterhouse on North Uist should have been saved, so as to create wealth and opportunity on the island and to ensure that the animals were killed at home rather than having to make a journey on the hoof.

It would be a huge mistake to repatriate the common agricultural policy. Reform is vital, however, and agriculture must get closer to the market and become much more market orientated. We must support reforms and fight against fraud. As I have said, we must take a step at a time. The House must maintain pressure to ensure that the CAP is reformed equally for all countries within the Community.

10.30 am

Mr. Christopher Gill (Ludlow)

It is a great pleasure to take up the remarks of my hon. Friend the Member for West Gloucestershire (Mr. Marland). I congratulate him on his advocacy of British agriculture. He has illustrated the many great successes that British agriculture has chalked up.

My hon. Friend talked about farm incomes. British farmers are enjoying tolerably good incomes at present only as a consequence of the United Kingdom having been thrown out of the exchange rate mechanism on 16 September 1992. Throughout the 1970s and 1980s, in spite of the common agricultural policy, farm incomes were falling. My hon. Friend referred to other issues, and made various comments to which I took exception. I would take them up if time permitted.

I have interests on both sides of the farm gate. These interests are declared in the Register of Members' Interests. I hope that my declaration will be sufficient for the House.

My hon. Friend the Member for Northampton, North (Mr. Marlow) talked about the high cost of the CAP. Not least among my concerns is its wastefulness. It is wide open to fraud and abuse. I shall demonstrate that it is harmful to many interests. It is, of course, fundamentally socialist.

Members have already referred to the diabolical expenditure of taxpayers's money on growing tobacco in Greece that nobody can smoke. In the past, the CAP has encouraged enormous surpluses. Disposal of those surpluses has cost a great deal of taxpayers' money. The surpluses were a huge embarrassment to the Commission and to the Governments of member states.

FEOGA grants have created enormous problems in the abattoir industry, a sector of agriculture of which I know a little. The grants have created over-capacity. More than anything else, the abattoir industry suffers from over-capacity. Unfortunately, that over-capacity has been encouraged by the availability of FEOGA grants. It has been forced upon the industry also by legislation emanating from Brussels.

Many of the FEOGA grants given to agriculture have disappeared with the enterprises to which they were made available. Many enterprises turned out to be non-viable or economically unsound. There has been a huge on-cost as a result of taxpayers' money being funnelled into unviable businesses. The cost has resulted in the rest of the industry being put at a severe commercial disadvantage.

The hon. Member for North Cornwall (Mr. Tyler) referred to the relatively tiny amount of money that is paid out by the taxpayer that actually reaches the practical farmer. I agree with his analysis. That, however, is the extent of my agreement. I cannot possibly agree with his further thoughts on the subject. I do not share his optimism that remaining in the CAP will lead to a resolution of the present difficulties.

We do not know the cost of fraud in the Community, which last year was estimated to be anything up to £6 billion. When the Court of Auditors reported last month, there was speculation that it might be only £2 billion. A national newspaper stated that the only quantifiable amount of fraud was £400 million. When it comes to fraud, we pay our penny and take our chance. There is no doubt, however, that fraud takes place. Various initiatives have been taken to control it.

The burden of controlling fraud falls not upon the Mafia or the big-time fraudsters but upon my constituents. For example, it falls upon the farmer in the Corvedale who owned two farms and handed them over to his two sons to be farmed as two separate entities. To this day, he cannot persuade the Ministry of Agriculture, Fisheries and Food that the farms are two separate enterprises. Consequently, all his grants and subsidies are held up.

Control measures bear down heavily on a farmer near Bridgnorth, who has lost subsidy as a result of having made a mistake in his application form. He declared a heifer instead of a bullock. The cash would have been the same, but there has been disqualification because of the control measures that have been introduced. There are farmers in the Bishop's Castle area who have experienced enormous difficulties over their suckler cow subsidies, because the information they gave in their application forms was slightly wrong.

These are the people who are paying for the control measures which are introduced to counteract the fraud of the Mafia and the other big-time fraudsters who continue to defraud regardless.

Mrs. Teresa Gorman (Billericay)

Is my hon. Friend aware that farmers in New Zealand had tremendous problems with form filling, and were being driven mad by bureaucracy? The New Zealand Government—incidentally, a Labour Administration—have dumped the subsidy system and returned to a free market. The New Zealand farmers are now doing wonderfully well without bureaucracy on their backs.

Mr. Gill

My hon. Friend makes an extremely good point. The New Zealand Government stopped subsidies. They also stopped many welfare payments. Why did they do so? They took that action because the money ran out. Having weaned the farmers and others off subsidies, the New Zealand Government find that they have a much more vibrant economy than that of the United Kingdom or anywhere else in western Europe. They have a strong currency, low inflation and low unemployment. As I understand it, there is scarcely a farmer in New Zealand who wants to revert to the previous heavily subsidised system.

There are four reasons why the CAP is making things so difficult. As time is limited, I shall be brief in describing the harm that it is doing. It has had a disastrous effect on the pastoral economies of the third world. It negates the law of supply and demand. It is harmful to innovation in agriculture. It is almost immune to the real needs of the marketplace. It is socialist. It imposes quotas, specifies qualities and fixes prices. The end result was surpluses. We have tweaked the CAP again, with the result that there is more political interference and more of the planned economy, which is in great danger of creating shortages in the cereal market because of the introduction of set-aside.

I understand why the hon. Member for North Cornwall can support the CAP. Doubtless the spokesman for the Opposition, the hon. Member for Glanford and Scunthorpe (Mr. Morley), will jump to his feet to support it. They should support it, because it is a socialist concept. I cannot understand, however, why a Conservative Government can be such a willing accomplice to Soviet-style central planning. It is simply naive to believe that the system is capable of reform. It is fundamentally flawed. It is impossible to police and control. It is hugely expensive. The public pay twice: once as taxpayers, and a second time as consumers.

All that is in complete contrast to the old British system, the deficiency payments scheme, which had the advantage of redistributing money. Money was taken from the taxpayer. It subsidised the production of food, which reached the marketplace at a cheaper price, to the ultimate benefit of those on low incomes. It was a good system.

We were told that we would persuade our continental partners to adopt that when we went into the European Community. We lost on that count, just as we have on so many others. To believe that one can reform the CAP is a triumph of hope over experience. It is time for those who advocate reform to stand up and spell out exactly what those reforms are. The onus is on those people, because the farming industry cannot prosper in this present state of uncertainty, and it certainly cannot go on if it continues to go further and further away from the realities of the marketplace.

10.40 am

Mr. Elliot Morley (Glanford and Scunthorpe)

I congratulate the hon. Member for Northampton, North (Mr. Marlow) on securing the debate today, as these are important issues—there is no denying that. There are severe problems with the CAP that need to be dealt with. It needs to be reformed. That is the position of the Labour party. I have to say, however, that it is going it a bit to describe the right hon. Member for Suffolk, Coastal (Mr. Gummer), when he came back in 1992, as some kind of red commissar presiding over a centrally planned economy within the CAP and the European Union. That is somewhat stretching the point.

Although I listened to the hon. Gentleman's argument carefully—indeed, the argument for repatriation is a position that has been taken by a number of commentators, and there are a number of options for reform—the concept of repatriation and a free market are a contradiction in terms. One cannot have repatriation of European funds to member states and allow them to subsidise different sectors of agriculture in different countries, and then hope to have a free market on a level playing field. That just could not be done. I hope that the hon. Gentleman will accept that.

I have a constituency interest in the pig and poultry sector. Although there is a little truth in what the hon. Gentleman said about the poultrymeat sector, in the pig sector there has been a major move to extensive field systems, and that is a welcome change in terms of pork production. So he can eat pork with a clear conscience in terms of the way in which it is produced in this country.

I was also surprised with the storyline in "The Archers", which has been touched on. The story was that, although Brian Aldridge lost his £9,500, he was receiving an integrated administration and control system cheque for nearly £110,000, and that caused particular offence to another character, a business man whose business had gone bust in the recession.

As he pointed out, the whole idea of the changes in 1992 was to give compensation to the area payments for reduced prices, yet cereal prices have gone up. It is true that is partly as a result of the fallout in the devaluation of the pound—there is no denying that—but there is no doubt whatever that, in the arable sector at the moment, it is a win-win situation for farmers. Indeed, the monthly IACS cheques are just like monthly lottery wins in some sectors.

Mr. Marlow

Is the hon. Gentleman saying that it is the policy of the Labour party that large farmers should not get compensation for land that is taken out of production?

Mr. Morley

It is certainly the policy of the Labour party that we should move away from production subsidies. I want us to be absolutely clear about that. Although we recognise that there is a need for agriculture support in certain sectors, we believe that there are better ways of doing that. I will touch on those in a moment.

When approaching the issue, it does not help to take a negative isolationist view within the European Union. I notice that, in Farming News, Sir David Naish said:

Internal sniping by politicians is jeopardising Britain's chances to win allies before next year's EU inter-governmental conference". He continued:

And that made it extremely difficult for the NFU to make its case for UK agriculture within Europe". Although there is a perfectly respectable case for arguing the different ways of approaching reform of the CAP, it does not help to be in the Government's situation, split between the different wings—the Euro-sceptics and the Europhobes. That has paralysed their approach to the way in which it should be done.

To be fair, the hon. Members for Northampton, North and for Ludlow (Mr. Gill) have won their arguments with the Conservative party in many ways. The Government are the prisoner of the right. They have moved towards the positions of other Conservative Members in the campaign that they have been running. It is the first time that a Government have gone cap in hand to a group of rebels rather than withdrawing the Whip. The Labour party recognises the problems of the CAP, and they are also recognised in Europe. In a recent report, Mr. Fischler stated that there was a need for simplification of the CAP. He went on to say that it has

become quite complicated over time, and increasing complexity has made policy management increasingly difficult. In addition it has led to a negative image of the CAP in public opinion (complicated, opaque, bureaucratic, not understandable, open to abuse and fraud)". He is absolutely right, and I am pleased to see that it is recognised at the highest levels of European policy-making. I very much want to see something stem from that.

I make it clear that we in the Labour party are committed to radical reform of the CAP. We are not afraid to argue for that, both in this country and within the European Union. But the difference between the Labour party and the Government is that we have allies in the European Union, and we can find consensus in terms of getting that agreement.

We want to uncouple agricultural support from production. We want an end to quotas. We believe that set-aside is a negative use of public funds, except when it is used for conservation purposes—long-term set-aside. We want to move towards world pricing for agricultural products.

We also recognise that there is a need for support, but, as part of the change within the CAP budget, we want to see the available funds redirected towards environmental support, and—perhaps as important—support for the wider rural economy, in creating jobs and supporting businesses. We want to recognise the problems of upland farms and their needs. Although we want to press for radical change, we believe that we can encourage and support the approach towards a better rural environment with the funds available.

If one contrasts that positive approach with that of the Government and their priorities on CAP reform, one will see that, according to their Budget statement, within the areas where they have some influence of reform, they want to cut the EC surplus food scheme altogether; restrict eligibility for the R3 carcases category—a stunning 3 per cent. reduction in the number of carcases available—withdraw from the school milk scheme; end the EC processing and marketing grants scheme; end the fisheries grants; and cut back on research and development, at a time when there is a great deal of consumer concern about food, and there is a pressing need for R and D in all areas of agriculture.

That is a glimpse of the Government's priorities for reform—snatch the milk from our nation's schoolchildren, mug our pensioners and poor for the cheap butter and mince, and invite redundancies from our major team of scientists who are doing vital work on research on the risk to consumers from bovine spongiform encephalopathy. At a time when everyone in the agriculture sector agrees on the need for increased marketing and added value, particularly in developing a high-value meat export trade and moving away from live exports, funds through European Union schemes are to be axed.

I have seen at first hand the advantages of the marketing and processing scheme in expanding food companies, both in my constituency and nationally, including Lincolnshire.

Mr. Marlow

The hon. Gentleman says that he wants to do away with production subsidies. Does he count area payments for arable farmers as production subsidies? If he does, and he is to do away with them, what agriculture support will he offer in the arable area?

Mr. Morley

Area payments are a negative use of public money. I do not think that they are efficient. Indeed, they do not meet the hon. Gentleman's criteria. He was talking about money going to large farms instead of small farms, but the area aid system works against that.

I know that there are arguments both for and against modulation, as it is called, but the hon. Gentleman says that he wants more support for small farmers, and the present system of arable aid payments will not achieve that. We want a support system that is based on giving farmers the opportunity to opt into various environmental support and management programmes—and, of course, an extension of the existing environmentally sensitive area schemes, which we have long supported. We believe that they have a very useful role to play.

Reform must have a social and environmental objective. We must seek consensus and co-operation with our European partners in order to secure change of that kind. It can be done with good will and determination, but it will not be done if we act on the basis of opting out, adopt negative attitudes, criticise and insult foreigners at party conferences. That is why it cannot be done by the present Government.

10.50 am

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Tony Baldry)

I am genuinely grateful to my hon. Friend the Member for Northampton, North (Mr. Marlow) for giving the House an opportunity to debate the important issues surrounding the common agricultural policy. We have had a thoughtful and informed debate, in which constructive speeches have been made by hon. Members on both sides of the House, and a range of philosophical approaches to both agriculture and Europe have been aired.

The current common agricultural policy has few supporters in this country. It attracts much criticism. It costs taxpayers a great deal of money; it raises food prices for consumers, albeit not by as much as is sometimes claimed; it is vulnerable to fraud; and it imposes a number of bureaucratic restrictions and controls on farmers that increasingly limit their initiative. It disadvantages both our farming industry and the food industry that relies on its products.

For those reasons, we have long pressed for reform of the CAP. There has been some progress. First, owing largely to United Kingdom pressure, a ceiling on CAP spending has been in place since 1988, and only unanimity can alter it. That single change has helped the proportion of the EU's budget that is spent on agriculture to fall from nearly 70 per cent. in the late 1980s to 50 per cent. now.

Secondly, in 1992, CAP reforms dramatically reduced cereal and beef support prices, and reduced the reliance on intervention as a market management mechanism. Those changes have contributed to the almost complete elimination of the food mountains of the past. Intervention stocks of frozen beef in the EU stood at nearly 1 million tonnes early in 1993, and are now down to a minimal 12,000 tonnes. Intervention stocks of cereals in the EU totalled nearly 32 million tonnes two years ago; the total last month was under 5 million tonnes.

Thirdly, and most important for the future, the United Kingdom played a major part in ensuring a successful conclusion to the GATT Uruguay round negotiations, including a far-reaching agreement on agriculture. That agreement set world agricultural trade on a liberalising course, and paved the way for further market-led reforms of the CAP.

Fourthly, the United Kingdom has argued strongly and successfully for better controls on CAP fraud and financial mismanagement. We have secured the adoption of several tough pieces of legislation, including the CAP "blacklist" regulation. There has also been a 50 per cent. increase in the reporting of irregularities, and much tougher action by the Commission—in the form of disallowance of spending—when member states' controls are found to be inadequate. That is extremely welcome.

The United Kingdom is leading the debate in Europe on CAP reform. The report of the CAP review group has been widely read throughout Europe. We have set out our aims clearly in the rural White Paper, published in October. Our overriding objective is to secure an efficient, prosperous, competitive and outward-looking agriculture that can operate and compete in increasingly open world markets, providing high-quality raw materials at competitive prices and paying due regard to the environment.

I do not think that there can be any dispute with our aims. In the discussions that I have held with farmers and their representatives, there is a basic and general recognition that the CAP is bound to change, and that their interests—all our interests—lie in a more open, market-oriented policy in which UK farmers, because of their efficiency and competitiveness, will be in a strong position to do well.

Many farmers are understandably concerned about the number of bureaucratic controls that now seem to be part and parcel of the CAP. Some of those controls are necessary to protect public money and reduce the opportunity for fraud; others are there because of artifical constraints on production, and are more difficult to defend. Creating the conditions in which quotas, set-aside and other supply controls can be removed will lift a major burden of bureaucracy from our farming industry.

In our view, that must be the way forward. It will mean continuing the process of progressively reducing production-related support, bringing EU support much closer to world market levels. That would substantially reduce the economic costs of the policy, and allow the eventual abolition of supply controls.

It does not mean renationalising the CAP; nor can radical changes in policy be introduced overnight. Reform must be introduced steadily, at a pace with which farmers can reasonably be expected to cope, and it must be Europewide. It will be no less important under a reformed CAP than it is now to ensure that member states cannot give their farmers national subsidies to snatch illicit competitive advantage: a level playing field is an imperative.

We do not seek to do away with a common policy for agriculture in the European Union. That would not be in our interests. It is also clear that cuts in production-related support will not be negotiable without some compensation for the farmers who are affected. Our aim will be to ensure that such compensation is fully uncoupled from production, is time-limited, and does not discriminate against United Kingdom farmers.

Mrs. Gorman

Does my hon. Friend agree that absent from this feast of information about the CAP is any mention of our urban population, whose taxes are paying for all this? Because of the CAP's inefficiency, they are being forced to pay through the nose for their food, to the tune of around £25 a week. Is that not a disgrace?

Mr. Baldry

My hon. Friend clearly was not listening to what I said at the beginning of my speech. I said that the CAP had few supporters in this country, that it cost taxpayers a great deal of money, and that it disadvantaged both our farming industry and consumers—and that, for those reasons, we had long pressed for its reform, which we intend to secure.

A reformed CAP will also need to place more emphasis on environmental concerns, although we must always remember that the primary purpose of farming is food production. The 1992 reforms introduced several important environmental elements, most in response to United Kingdom pressure. Future reforms will need to build on those, reflecting the importance that the public attach to the conservation and enhancement of our farmed environment. Such a package of reforms is coherent and logical, and the right way forward.

Alas, our approach is not yet universally shared by other member states, many of which are broadly happy with the way in which the CAP operates at present and would prefer to consider that the 1992 reforms were upheaval enough. It is, however, becoming increasingly clear that, as we move towards the 21st century, pressures for change will intensify.

The EU's existing GATT ceilings on subsidised exports will exert pressure on the policy, and without reform, growing surpluses could again begin to emerge. The next round of negotiations in the World Trade Organisation, which are due to start in 1999 and are designed to take further the process of trade liberalisation and subsidy reduction, will increase those pressures.

The forthcoming enlargement of the EU to include the countries of central and eastern Europe will also be an important factor. Extending the current CAP to those countries would be prohibitively expensive for the EC budget, and would further increase the danger of growing surpluses; it would also be contrary to the interests of the aspirant countries, whose economies could not afford the high prices and economic distortions associated with the CAP.

Against that background, I welcome the European Commission's new report on agriculture and the accession of the central and eastern European countries to the EU. That report is to be presented to the European Council in Madrid later this month.

Although it does not go as far as it should have, the report marks an important change in policy, recognising the validity of much of what we United Kingdom Ministers have been saying for some time. It makes it clear that prolonging the status quo is not a feasible option. and that further reform of the CAP must come. Our task now must be to build on that important step, and persuade our partners in Europe of our vision of reform. My right hon. Friend the Prime Minister will be urging his colleagues in Madrid to ensure that the European Commission's work is taken forward expeditiously. Inevitably, it will take some years to achieve the sort of CAP changes that we think are necessary, but I strongly believe that the changes that we are promoting are in the interests of farmers, consumers, taxpayers and the country as a whole, and we shall continue to fight for the interests of farmers and consumers whenever we can.